This is one of those bits of common wisdom that falls into the "it's more complicated than that" territory. Zoning laws are a contributing factor, but they are far from the only factor -- and it's a stretch to say that they're the deciding factor. Zoning is an issue. Rent control is an issue. Basic supply and demand is a huge issue that arguably outstrips regulatory roadblocks. Regional geography is also much more of an issue than people sometimes think.

Housing prices here are likely to stabilize, but they're not going to start seriously declining unless the job market starts declining, too.

> Eventually people will be fed up with the situation and they'll vote for a government that'll allow more development, at which point housing prices will plummet.

Clearly you don't live in CA. Homeowners vote more than renters, and they will never intentionally vote for policies that will put them underwater on their own mortgages.

Yes, it is finally leveling off after years of extreme increases in prices. Demand has cooled as mortgage interest rates have crept up.